Morrison government locks in Malcolm Turnbull's pet hydro project

The Morrison government will invest up to $1.38 billion in a massive expansion of the iconic Snowy Hydro scheme, cementing the legacy project of former prime minister Malcolm Turnbull.

The government is on Tuesday expected to announce it has approved the project on behalf of shareholders – the Australian taxpayers – after satisfying itself that the project is financially viable and will benefit energy users and the Snowy region.

The federal government has signed off on its investment into a massive expansion of the iconic Snowy Hydro project. Credit:Alex Ellinghausen

The Snowy 2.0 renewables project was announced in April 2017 by Mr Turnbull, and is considered one of his signature achievements. It promises to make east coast energy supplies more reliable and affordable.

Snowy 2.0 would pump water uphill into dams and release it at times of high electricity demand, acting as a giant battery and backing up intermittent energy produced by wind and solar.

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The government has given shareholder approval for Snowy Hydro Limited to proceed. This allows the Commonwealth-owned company to progress to the early works stage.

The Snowy Hydro board made a final investment decision in December and the government says it signed off on the project after reviewing its business case.

The government will now make an equity investment of up to $1.38 billion. Snowy Hydro Limited will finance the remainder of the project, which has been conservatively priced at $2 billion.

This figure does not include the cost of upgrading transmission lines and other infrastructure required to deliver the extra electricity capacity into Melbourne and Sydney, which may double the project's cost.

The government says the project will increase generation capacity by 2000 megawatts and provide 175 hours of energy storage, which could power 500,000 homes during times of peak demand.

Snowy 2.0 was the signature project of former prime minister Malcolm Turnbull.Credit:Alex Ellinghausen

It also says the project will lower wholesale electricity prices and create thousands of direct and indirect jobs.

Expert critical of Snowy 2.0 say the costs will be passed onto energy consumers and the government did not adequately assess alternative options. They also say other projects could meet peak power demand without expensive transmission upgrades.

Energy Minister Angus Taylor said Snowy 2.0 would be an integral supply of electricity "as the energy landscape experiences seismic change", and had an unrivalled capacity to generate and store power.

The government sign-off follows the announcement on Monday of a $56 million investment in a proposed second electricity interconnector between Tasmania and Victoria. The federal government says the project will unlock new generation and storage in Tasmania, improve reliability and affordability and boost both state economies. Federal Labor has matched the funding pledge.

The government has also announced $2 billion to top up the emissions reduction fund, as part of a $3.5 billion climate solutions package.